At least three US initial public offerings next week are linked to the energy sector, and more could be in the pipeline. Middle East turmoil is pushing up oil prices, while a nuclear crisis in Japan is adding to the growing demand for alternative energy sources including liquefied natural gas. These unexpected moves in commodities have made investors more interested in companies that might benefit from the run-up in prices.
-- Next week's IPOs have exposure to oil, gas, fertilisers
-- Could be the leading edge of a spurt of similar IPOs
-- Oil trading at 2 1/2-year highs, commodities boosted
"There's a fever right now for investments allocated in the energy space," said Robert Lutts, president and chief investment officer of Cabot Money Management, which has $500 million in assets under management. Three US companies with exposure to oil, gas and other commodities are expected to begin trading on the New York Stock Exchange on April 8:
SandRidge Mississippian Trust I, which offers exposure to royalty interests that SandRidge Energy pays on three dozen oil and gas wells in Oklahoma; Golar LNG Partners LP, a subsidiary of Golar LNG, a US liquefied natural gas shipper, which also owns offshore units that turn LNG back into regular natural gas;
CVR Partners LP, which makes nitrogen fertiliser out of petroleum coke produced at a Coffeyville, Kansas oil refinery of parent CVR Energy, an oil refiner and retailer. "If these deals are successful broadly speaking, that will be a catalyst for other people to revisit their plans," said Tim Gould, head of US equity capital markets at Macquarie Capital.
"There are opportunities for investors and companies alike in the current environment and, hopefully, it's part of an ongoing trend." Sources have told Reuters that several bigger energy and commodities companies could float later this year, while many smaller players all across the board within natural resources, energy and commodities are also weighing such plans.
Highlighting the trend, global commodities trader Glencore International AG is preparing an IPO for listing in Hong Kong that could raise $10 billion, sources familiar with the matter have said. US crude oil futures have surged in recent months, trading at 2 1/2-year highs on Friday over $107 per barrel. Demand has also been soaring for raw materials and natural resources such as coal, metals and agriculture-related products, helped by the booming growth of developing countries and especially China, a major importer.
Energy and natural resources are "a very important part of every investment bank's dialogue with companies," Gould said. Investment bankers have also said that as Japan begins recovering from the devastation of earthquakes and a tsunami, interest could grow in raw materials producers, exporters and other companies that cater to the rebuilding efforts.
What is more, bankers said the continuing nuclear crisis in Japan could trigger more worries about nuclear energy. "The appetite for future nuclear is diminishing very quickly," said Cabot Money Management's Lutts. "That only gives more credence to fossil fuels and alternative energy."
Money managers say it's unclear how long the trend will span, but in the short-term, energy and commodities companies - especially domestic ones, are attractive, said Tim Holland, a portfolio manager at Aston/TAMRO Diversified Equity Fund with $1.5 billion in assets under management. "If I was trying to raise capital, today - in my mind - is a much better environment than a couple of months ago. This is probably a good time to engage investors," he said.
Comments
Comments are closed.